Politics

Iran: The 63% Surprise

The overwhelming victory declared on June 13 by the Iranian authorities for President Mahmoud Ahmadinejad in Iran's presidential election is a disappointment for business, the Obama Administration, and the wider world. Unless Ahmadinejad radically changes his approach to government, another four-year term for the hardline and erratic President will likely make engaging Iran and easing tensions over its nuclear program more difficult than it might have been had he lost. Ahmadinejad's retaining power could also exert upward pressure on already rising oil prices by making confrontation between Iran, Israel, and the West more likely and by continuing to keep Iran's oil and gas wealth largely off limits to Western companies.
That the President won is not a great surprise, but his gaining 62.6% of the vote, against 33.7% for his chief rival, Mir Hossein Mousavi, a former Prime Minister, is a shocker—given that before the vote many analysts thought Mousavi was ahead. There are two possible explanations, and elements of both may be accurate. Once again, as in 2005, Tehran-based analysts appear to have greatly underestimated the President's support in the provinces, where Ahmadinejad has endeared himself through his modest lifestyle and through handing out everything from sacks of potatoes to cash and starting up development projects.
But many observers are coming to the conclusion that the Iranian authorities are guilty of massive fraud. Mousavi has already charged the authorities with stealing the election, and he may well have a point. The very quick announcement of Ahmadinejad's win on the night of June 12 as well as similar voting patterns reported throughout the country are suspicious.
Mousavi says he will continue the fight. "I'm warning I will not surrender to this dangerous charade. The result of such performance by some officials will jeopardize the pillars of the Islamic Republic and will establish tyranny," Mousavi said in a statement reported by Reuters.
Khamenei Endorses the Results But he and his supporters will have to deal with a powerful and ruthless state. Already the Supreme Leader, Ali Khamenei, Iran's highest authority, has endorsed the election results and warned the losers against "provocations." On June 13, police blocked off Mousavi's headquarters, preventing him from holding a news conference. As night fell, angry Iranians clashed with police in the most serious clashes seen by Tehran in a decade.
If the early suspicion that the election was stolen is confirmed, then the character of the Islamic Revolution has changed for the worse. As Columbia University Iran analyst Gary Sick puts it: "If the reports coming out of Tehran about an electoral coup are sustained, then Iran has entered an entirely new phase of its post-revolution history. One characteristic that has always distinguished Iran from the crude dictators in much of the rest of the Middle East was its respect for the voice of the people, even when that voice was saying things that much of the leadership did not want to hear."
The election leaves Iran's leadership badly split. Former President Hashemi Rafsanjani was enraged by Ahmadinejad's accusations of corruption during the campaign and threw his weight and money behind Mousavi. The Supreme Leader and Ahmadinejad now face the prospect of an opposition that includes important figures with strong revolutionary credentials.
Blow to Iranian Business The election results will come as a blow to Iranian business. Local executives give Ahmadinejad very low marks as a manager of the economy. They believe he has squandered Iran's oil wealth while crudely interfering with institutions such as the central bank. They were hopeful that matters might improve under Mousavi, who is considered a capable public official. Of course, Iranian business was always well aware that a second term for the President was a strong possibility.
Beyond a possibly turbulent aftermath to the election, a key question now is whether Iran's leadership will respond to the calls for a more pragmatic approach to government and international relations that Mousavi made in his campaign. Many Iranians would like to see an easing of tensions with the U.S. and even an opening for U.S. investment in Iran. Even Ahmadinejad has indicated some interest in the Obama Administration's overtures to work for a normalization of U.S.-Iranian relations. The U.S. says it will continue trying to engage Iran.
The trouble is the decision-making process in Iran is opaque and fraught with difficulty. There's a cynical joke among Iran-watchers now that each of Iran's top leaders wants to make sure that none of his rivals receives credit for ending the 30-year impasse with the U.S. What exactly Ahmadinejad will do in his second term may be hard to predict, but his "victory" is unlikely to prove good news.

Reed is a reporter-at-large for Bloomberg News and Bloomberg Businessweek.